Deadline approaches as new farm bill lingers

• Thirty-seven days remain until the current farm bill expires.
• While it may be a while before a farm bill is earnestly tackled by the full Congress, a new FAPRI study compares the programs already proposed by both the Senate and House.

The clock is ticking with just over a month remaining until the current farm bill expires.

Despite this – and the fact that merciless drought continues across much of the nation – there seems to be few concrete answers about what Congress will do to address the situation when lawmakers return from August recess.

The Senate, said North Dakota Sen. Kent Conrad this week, “carefully negotiated a new five year bill that enjoyed broad bipartisan support. We are prepared to negotiate a compromise with the House, but before we are able to do that, they need to reverse course and make the bill a priority.”

With a national election season in full swing there is little chance for House farm bill action to occur soon.

“There’s no indication that the House will be able to pass a standalone farm bill anytime soon,” says Pat Westhoff, director of the Food and Agricultural Policy Research Institute (FAPRI). “At least it won’t pass one before November, it appears.”

While it may be a while before a farm bill is earnestly tackled by the full Congress, a new FAPRI study (see study here) compares the programs already proposed by both the Senate and House.

Westhoff was interviewed by Farm Press on August 21. Among his comments:

On the FAPRI study…

“We looked at the bills passed by the full Senate and the House Agriculture Committee. The bills do have a lot in common. Obviously, both include the elimination of direct payments and the creation of new programs intended to provide help to farmers and lenders when some bad thing happens, whether they face low prices or low revenue.

“The basic notion behind the two bills is pretty similar with similar levels of spending expected by the taxpayers. We shouldn’t be too surprised that our results show that the overall impacts on average levels of farm income are also pretty similar.

“There are some important differences, though.”

On the House Agriculture Committee farm bill…

“The House bill puts more of its emphasis on the Price Loss Coverage (PLC) program. In some ways that’s like our current counter-cyclical payment program.

“There are two major exceptions. One is that the target prices are higher than under current law. Second, just as importantly, payments are tied to how much you plant rather than historical base acreages. It’s also important where those target prices are set. In our analysis it would result in significantly larger payments for some crops than for others.”

Senate bill

On the Senate farm bill…

“The Senate farm bill doesn’t have anything like the PLC proposal. It has the ARC — Agricultural Risk Coverage — program, which is often called a ‘shallow loss program.’

“ARC makes payments when revenues on a farm or in a county fall below 89 percent of a recent average. That program would provide benefits to producers whenever revenues turn down from recent averages. That’s true whether, or not, you’re starting with very high levels of revenue or very low levels. So, it might pay out in different circumstances than would the PLC.

“The House bill also has a similar Revenue Loss Coverage (RLC) program, but PLC is likely to be the more attractive option for most producers under the House bill.

“Given the particular parameters they picked for those programs, we estimate that you’d probably get more in payments under the House bill if you’re a barley, rice, peanuts or wheat producer. You’d get comparable, or a bit more in payments, under the Senate bill if you’re a corn or soybean producer, on average.”

The Supplemental Coverage Option as wild-card…

“There is one very big wild-card in all this: the Supplemental Coverage Option (SCO). It’s referred to in both bills, but under different rules.

“It’s gotten some attention but perhaps not as much as it deserves given how important it is. SCO is a program you’ll have to pay a premium for in exchange for which you could cover a lot of what would otherwise be a deductible.

“In the Senate bill, if you participate in the ARC program you can only get SCO benefits covering losses in excess of 21 percent. If you don’t participate in ARC, you can have the SCO coverage for losses in excess of 10 percent out-of-pocket.

“On the House side, you can choose to participate in both PLC and SCO. SCO, but you cannot sign up for both RLC and SCO for a particular crop.

“It appears that the choice between ARC and the SCO on the Senate side is a relatively close call. However, we think many people will take ARC if they’re presented with the Senate package because the average payments might be a few dollars higher in most cases. Plus, you wouldn’t have to pay a premium up front.

“On the House side, the combination of PLC and SCO looks pretty attractive — even in corn and soybean country where it could be a good alternative to the RLC program that the House bill offers.

“In our basic analysis of the House bill, we assumed that half of the producers who sign up for PLC also would take SCO. However, we recognize that for producers trying to maximize their payments over time it would make sense for most of them to participate in SCO.

“We also looked at the extreme alternative where everyone participated in the House’s PLC and SCO programs. That results in more benefits to producers, but it would also increase budgetary outlays by taxpayers well above the levels estimated in our basic analysis of the bill and also well above levels estimated by CBO (Congressional Budget Office).”

Sticking points

If the House ever passes a farm bill and this actually goes to conference, what are the big sticking points between the versions?

“If they go to the table with what’s considered in our report there are some obvious issues.

“One is whether or not there should be something like the PLC coverage in the House bill. Some folks in the Senate are opposed to that notion and don’t want to see a target price-type option as an alternative.

“Some in the House feel just the opposite. They’d almost rather not have a Revenue Loss Coverage option.

“So, there’s a philosophical question about the best way to provide support. Is it to provide kind of an insurance against lower prices, as the PLC does? Or is better to provide something that will benefit producers experiencing shallow losses like the ARC package tries to do?

“Probably equally important — maybe more important — is the question of who gets what? Different people have different estimates about how these programs would pan out, how often they’d pay, etc.

“I do think that most people agree that for crops like peanuts, rice and barley, the House would pay out more and more often than would the Senate bill. If peanut and rice producers have their way, they’ll probably go with the House proposal.

“With corn and soybeans, there are questions. It depends on where the conference would set particular levels and where people think markets will go in the future. Some producers (of those crops) could come down on each side.

“The CBO didn’t score the fiscal cost of SCO as being excessively large. We’d agree that as long as participation is fairly low it may not cost taxpayers that much. But it’s a program that has both the potential to be very beneficial to producers but also very costly to taxpayers if participation levels are high.”

On the “real” problem…

“The real problem is how to get to a final piece of legislation that can be voted on by both the House and Senate…

“There can always be conversations between House and Senate staff and the like. But to have an actual formal conference, you’d have to have the House pass a farm bill.

“How the (November) elections come out will matter a lot in how a lame-duck session would play out. And there are many, many permutations on how things could happen.

“If Republicans hold the House and take the Senate and the presidency, there’s a lot of speculation that there will be pressure to put off choices about the farm bill and other major issues until after the new Congress takes power. That would mean only temporary measures to extend the existing farm bill for a few months.

“If, however, the status quo remains in place after the elections there may be an attitude of, ‘Well, this is the way it’s going to be. We might as well get things sorted now.’ And if there is other legislation to address the budget’s bigger picture – the so-called ‘fiscal cliff’ – you can imagine that some (lawmakers) might decide it’s time to figure things out and get a farm bill passed as part of a larger deal during, or shortly after, the lame duck session.”